ESU required to segregate $6M in construction money

In a new accountability measure, PASSHE obligates universities to deposit funds with state

East Stroudsburg University and other members of the Pennsylvania State System of Higher Education that say they have $1 million or more on hand for proposed construction must demonstrate it by placing the money in a state system-controlled account before the project starts.

Comment

By BILL SCHACKNER

poconorecord.com

By BILL SCHACKNER

Posted Jan. 27, 2013 at 12:01 AM

By BILL SCHACKNER
Posted Jan. 27, 2013 at 12:01 AM

» Social News

East Stroudsburg University and other members of the Pennsylvania State System of Higher Education that say they have $1 million or more on hand for proposed construction must demonstrate it by placing the money in a state system-controlled account before the project starts.

The requirement will apply to academic, recreation and other projects seeking PASSHE bond financing, officials said.

It is the first of what may be a number of moves to tighten PASSHE oversight in the aftermath of financial problems involving California University of Pennsylvania, and its convocation center.

The first school affected by the modification will be East Stroudsburg University, which on Thursday received approval from the PASSHE's board of governors for the $36.2 million initial phase of the Keystone Center, a planned multi-purpose facility.

Under the rules, $6 million in reserves that the school says it has for the work must go into a sequestered account, said Ronald G. Henry, the recently named chairman of the PASSHE board's finance, administration and facilities committee. The system intends to issue PASSHE-backed bonds for the rest of the Phase I work.

"It would be foolish of us not to examine these policies and procedures," Henry said in explaining the change. "If we are going to be prudent stewards of public dollars, we need to make the best use of those dollars."

In June, the Pittsburgh Post-Gazette reported that no system was in place to verify that PASSHE schools promising campus funds or donations for projects actually fulfill those fundraising pledges, and even if they do, that the money won't be shifted to some other use once construction starts.

That was an issue in the PASSHE's reaction to initial assertions by CalU that it would contribute $12.3 million toward its new $59 million convocation center, including almost $7 million in existing funds in hand.

Information, including documents obtained under the state Right-to-Know Law, showed little, if any, attempt by PASSHE officials to verify CalU's funding claim.

In 2008, a year before groundbreaking, CalU submitted a document to PASSHE leaders listing $6.8 million in cash on hand plus $5.5 million in donations as funding sources for the center with its arena for 6,000 people. The presence of those funds contributed to a PASSHE decision to award $23 million in project financing on top of $19 million in state grants.

In March 2011, with the center mostly built, CalU submitted a revised funding statement saying it had no cash on hand to build the center. Instead of $5.5 million in donations, Cal U's statement listed zero. The school later said it had raised only $4,000 in donations to date and was still seeking donations.

PASSHE a month later approved an extra $15 million in bond debt to make up for the shortfall and rising costs.

PASSHE in June said the CalU case was unprecedented.

"We've never had a situation where the documentation turned out to be not totally accurate," PASSHE spokeswoman Karen Ball said.

On Thursday, Henry said tight financial times made the change prudent. He declined to comment on the CalU situation and its connection to the new requirement, but he added, "If you pay attention to things that are occurring around you, you try to learn from them."

Henry said the PASSHE's facilities manual, which includes guidelines for construction, already has language requiring universities to place funds into a PASSHE-controlled account. It also has language saying construction that does not have resources to meet funding requirements laid out in project plans is to be postponed.

However, Henry said he's not sure if the policy in its current form is adequate. "I don't know the extent to which the manual was followed in the past," he added.

Richard Staneski, vice president for finance and administration at ESU, said typically his university establishes an amount it will put toward a project, secures approval from campus trustees and then pays the amount from university accounts as needed for the work. He said ESU will have no problem meeting the requirement.